PDN ANNUAL REPORT 2024
CONTENTS

Sustainability Policy

In the 2024 Sustainability Report, Pensioenfonds PDN explains its sustainability policy and accounts for the most significant results over the reporting year 2024. The complete sustainability report (PDF) can be found on the Pensioenfonds PDN website under downloads and is included in the 2024 annual report.

 

The fund again further hone its sustainability policy in 2024 in the light of our commitment to sustainability and responsible investing. In the context of European sustainability legislation (SFDR), for the first time Pensioenfonds PDN has formulated a so-called PAI statement, including scores. A PAI statement is a statement that reflects the key unfavourable effects of investment decisions on sustainability factors. The fund has also honed its country policy. An inclusion policy is currently being used based on minimum requirements in the theme areas of corruption and labour and human rights. Moreover, countries are still excluded if they do not adhere to international conventions or that are under UN, EU or Dutch government sanctions; this has not changed. Furthermore, the fund has expanded its carbon reduction target, clarified its ESG KPIs and has made a start on an ESG risk framework.

 

With a view to a sustainable future, we will continue our efforts unabated in 2025 and remain committed to promoting sustainability at every level of our investment policy.

 

Future perspectives

When we look ahead, it is clear that various important themes deserve our attention:

  • Digital transformation and sustainability: Technology’s role in promoting sustainability is undeniable. Innovations can contribute to energy efficiency and the development of smart, sustainable cities.
  • Water management: Sustainable management of our water sources is essential if we are to ensure access to sufficient clean water for future generations.
  • Social inclusion and employment: Investing in sustainable projects enables us to help create jobs and promote social inclusion, especially in developing countries.
  • Circular economy: Supporting companies that embrace circular economy principles is a step towards minimising waste and the efficient use of resources.
  • Ethical investment and human rights: It is our responsibility to ensure that our investments embrace ethical considerations and respect for human rights.
  • Biodiversity: The protection and promotion of biodiversity is essential if we are to retain healthy ecosystems, which are crucial for life on earth. The investment world is increasing its focus on investments that help protect natural habitats and species diversity.

Although we are aware of the complexity of the challenges we are facing, we also see the possibilities of making positive impact. With dedication, innovation and cooperation, we can help create a more sustainable and just world for everyone.

To increase our positive influence as a fund, we have been focusing on three specific sustainability themes since 2021:

  1. Health and Well-being
  2. Climate and Energy
  3. Raw Materials and Circularity

These themes are linked to the United Nation’s four sustainable development objectives: the Sustainable Development Goals (SDGs). We are focusing more specifically on:

  • SDG 3: Good health and well-being
  • SDG 7: Affordable and clean energy
  • SDG 12: Responsible consumption and production
  • SDG 13: Climate action
Six policy instruments defined in the sustainability policy are used to contribute to our objectives.

More information on the Sustainability Policy and the policy instruments Pensioenfonds PDN uses for this are available on Pensioenfonds PDN’s website via this link. This page also provides an explanation of the policy being implemented, including reports on how votes were cast at shareholder meetings and the progress of engagement actions. Pensioenfonds PDN also publishes a list of companies and countries in which it invests on its website (each year).

1. ESG-integration

Where possible, Pensioenfonds PDN manages and evaluates investments according to ESG factors. ESG stands for Environmental, Social and Governance. Sustainability risks for the portfolio and other ESG aspects are considered when making investment decisions in the various mandates. Another illustrative topic that falls within this is carbon emissions. Pensioenfonds PDN aims to reduce the investment portfolio’s carbon emissions via ESG integration in the investment process.

 

Outcome of the objectives for CO2 Reduction

2. Impact Investing

Impact investing is investing in countries, companies or projects that can help resolve social and environmental problems, such as poverty in developing countries or climate change. Pensioenfonds PDN does this on the basis of the United Nations Sustainable Development Goals.



Outcome of the objectives for Impact Investments

3. Engagement

Engagement involves dialogue with the companies in which we invest and helps stakeholders stimulate companies to change. The engagement instrument enables agreements to be made with companies about plans, objectives or ambitions, with respect to carbon emission reduction, for example. Engagement is also used to start a series of intensive dialogues with companies whose practices are not in line with the UN Global Compact’s principles and where potential or actual negative impact has been identified. An engagement process can be labelled as a proactive or reactive engagement process. If the engagement process does not lead to the desired result, the conditions under which disinvestment takes place are stated in the escalation ladder.

 

Engagement process

An engagement process comprises four phases. It starts with determining a company-specific objective. CTI then contacts the company concerned to raise the identified issues. CTI then monitors the extent to which the company commits to addressing the issue up to the point that the issues are resolved and the objectives are achieved. Unfortunately, the latter is not always the end of an engagement process. Sometimes, companies do not ‘engage’ during these phases, resulting in the engagement process being aborted.


Outcome of the objectives for Engagement

4. Voting Policy

As an institutional investor, Pensioenfonds PDN complies with the Dutch Corporate Governance Code. This code defines principles and procedures for good corporate governance. Pensioenfonds PDN’s good governance policy aims to protect our interests as a shareholder while living up to our responsibility in that role. Wherever there is an indication that a company is acting irresponsibly, the fund has several options to exert influence, including voting at shareholder meetings of all listed companies in which the fund invests worldwide. On our website every quarter, we publish how CTI voted on behalf of Pensioenfonds PDN in general meetings of the companies in which we invest. We publish this per individual company and per voting point and this can be found on the Pensioenfonds PDN website via this link.

1,097 shareholder meetings took place in 2023 for all listed companies in Pensioenfonds PDN portfolio. CTI cast votes on behalf of PDN Pension Fund at 1,089 of these meetings. This was not possible at eight meetings due to applicable liquidity constraints or other operational restrictions in the voting process. This means that the KPI was not strictly achieved. However, Pensioenfonds PDN is satisfied with the result that, where possible, votes were cast at every shareholder meeting. 

 

Votes were cast on over 14,000 proposals at all 1,089 shareholder meetings. As mentioned above, it was not possible to vote at various shareholder meetings, resulting in a total of 0.5% of the number of proposals not being voted on. Votes were cast on the remaining 99.5%. Figure 6 shows the number of votes for or against, blank votes, or abstentions. ‘Other’ includes proposals in which it was not possible to cast a vote ‘for’ or ‘against’ but, for example, frequency of reporting on remuneration policy is requested (e.g. annually or biennially). Again, this KPI was not strictly achieved but Pensioenfonds PDN is satisfied with its voting activity in 2023.



Outcome of the objectives for the Voting Policy

5. Exclusion

Pensioenfonds PDN’s investment policy produces an investment portfolio that reflects its standards and values. For that reason, Pensioenfonds PDN excludes companies and countries based on the risk of negative impact and conflict with our norms and values. Pensioenfonds PDN applies criteria for this such as the harmfulness of the product, the impossibility of effecting change through voting and engagement, and the fact that there would be adverse consequences if the product ceased to exist.

 

Product groups that we exclude or partially exclude include controversial weapons, cluster munitions, coal, oil from tar sands and tobacco. We exclude companies or countries based on their behaviour with respect to the UN Global Compact’s Ten Principles and the UN Security Council, Dutch or European international sanctions lists. Countries and companies are added to our exclusion list if there are serious and structural violations.

Our objective for exclusions means that we do not hold any investments, excluding our fund investments, in companies and countries that are on our exclusion list. We have achieved this target. Individual investments in companies and countries on the exclusions list were sold within a calendar quarter of the screening taking place. At the end of 2023, Pensioenfonds PDN’s list of exclusions comprised a total of 174 companies and fourteen countries in the investment universe. This represents an increase of 6 companies and roughly the same number of countries compared with the end of 2022.



Outcome of the objectives for Exclusion

6. Transparancy

Pensioenfonds PDN publishes an annual Sustainability Report to ensure transparency about the Sustainability Policy and its implementation. On its website, Pensioenfonds PDN also publishes an annual overview of the outcomes of the total investment portfolio as well as reporting on the results of its voting policy at shareholder meetings. Finally, Pensioenfonds PDN participates in market-wide initiatives such as the VBDO benchmark and the UN PRI assessment.

 

Implementation of Sustainability Legislation and Covenants in 2024

Mandatory legislation and regulations with respect to sustainability have increased in recent years as a consequence of the European Action Plan ‘Financing Sustainable Growth’. The purpose of this Action Plan is to encourage the financial sector to contribute to the Paris Climate Agreement objectives. This Action Plan has resulted in new European regulations, such as the EU Sustainability Finance Disclosure Regulation, which aims to harmonise transparency regarding ESG risk management, and the Taxonomy Regulation, which aims to create a clear definition of ecological sustainability.

 

EU Sustainability Finance Disclosure Regulation (SFDR legislation)

In the context of the SFDR legislation, Pensioenfonds PDN has opted for an ‘article 8 classification’. This means that Pensioenfonds PDN implements sustainability characteristics within its investment portfolio and also reports on them transparently. In 2024, Pensioenfonds PDN reported under the SFDR legislation on key adverse effects on the sustainability factors prescribed by the SFDR legislation. Pensioenfonds PDN has not yet set a target SRI percentage as defined in the SFDR. Pensioenfonds PDN most certainly does invest in sustainable investments, but the difference in definitions of sustainable investments is still complex. In 2025 Pensioenfonds PDN will further investigate whether employing a minimum percentage of sustainable investments as referred to in the SFDR legislation is desirable and feasible (also see the Taxonomy section below).

 

Taxonomy

Through the Taxonomy Regulation, the European Union has established criteria for determining whether each economic activity is carried out in a sustainable manner. Those are economic activities that contribute to an ecological goal and which do not cause significant damage to other ecological goals. In total, six different ecological objectives have been defined. Pensioenfonds PDN believes it is important to also invest in economic activities that contribute to these ecological objectives. To determine how much Pensioenfonds PDN invests in these activities, it must first be clear to what degree the companies in which PDN Pension Fund invests, and can invest, contribute to these ecological goals. To determine this, more data is needed from these companies. In the fourth quarter of each year, Pensioenfonds PDN will review data of companies in the portfolio and assess the target percentage of Taxonomy-classified investments that Pensioenfonds PDN can set for the following year.


Looking ahead

Following a year of continued efforts and commitment to our Sustainability Policy, in 2025 we will continue to focus on strengthening our sustainability ambition and implementing concrete measures that contribute to a better future both for our members and society as a whole.

 

In the coming year, we will continue our efforts to further develop and implement our Sustainability Policy.
Some important topics that are high on our agenda include:

  • Sustainability framework: We will continue to enhance our framework for sustainability, paying specific attention to relevant themes and investigating how we can further strengthen our processes relating to sustainable investment.

  • Sustainability Report: Formulating our Sustainability Report continues to be a key focus point. We aim to produce a transparent report on our sustainability performance and on our progress in relation to our targets.

  • Target allocation impact bonds: We will review our commitment to impact bonds and make adjustments where necessary to strengthen our targets in this area.

  • Target allocation of EU taxonomy-related investments: Identifying and allocating investments that comply with EU taxonomy will be a focus area to support our sustainability objectives.

  • ESG risk management: We will continue our commitment to the effective identification, assessment and management of ESG risks within our investment portfolio. We will devote additional attention to this in 2025 to further develop the ESG risk framework.

With these objectives in mind, we aim to further strengthen our role as a responsible investor and contribute to a more sustainable future for all.

 

Looking ahead to 2024

Following a year of continued efforts and commitment to our Sustainability Policy, in 2024 we will continue to focus on strengthening our sustainability ambition and implementing concrete measures that contribute to a better future both for our members and society as a whole.

In the coming year, we will continue our efforts to further develop and implement our Sustainability Policy. Some important topics that are high on our agenda include:

  • Sustainability framework and ESG risk management: We will continue to refine our framework for sustainability and the management of environmental, social and governance (ESG) risks. In doing so, we will pay specific attention to relevant themes during our planned theme days.
  • Sustainability Report: Formulating our Sustainability Report continues to be a key focus point. We aim to produce a transparent report on our sustainability performance and on our progress with respect to our targets.
  • Target allocation impact bonds: We will review our commitment to impact bonds and make adjustments where necessary to strengthen our targets in this area.
  • Target allocation EU taxonomy-related investments: Identifying and allocating investments that comply with EU taxonomy will be a focus area to support our sustainability objectives.
  • ESG risk management: We will continue our commitment to the effective identification, assessment and management of ESG risks within our investment portfolio.

 

With these objectives in mind, we aim to further strengthen our role as a responsible investor and contribute to a more sustainable future for all.